Bain and Huawei return to 3com buy-out table
Will they appease US concerns this time around?
Bain and Huawei's planned $2.2bn buyout of 3Com is back on. The two firms plan to resubmit their bid under the same financial terms with the difference that Huawei will receive only restricted access to 3Com's security products, the Wall Street Journal reports.
3Com's TippingPoint division sells intrusion prevention technology to the US government, among others. The prospect of a Chinese firm getting access to key anti-hacker technology spooked the Treasury's Committee on Foreign Investments. It launched an investigation that held up the deal and was heading towards blocking it.
The concerns were fueled by the fact that Huawei was founded by Ren Zhengfei, a former Chinese PLA army officer. Under the original terms of the deal, Huawei would secure a 16.5 per cent stake in 3Com, while Bain retained the rest.
Huawei has dismissed these concerns as "bullshit", pointing out that no objections were raised when 3Com and Huawei got into bed in a 50-50 joint venture.
Sensing defeat, Bain Capital and Huawei Technologies withdrew their application to the Committee on Foreign Investments in the United States (CFIUS) in late February, effectively curtailing the planned buyout. The deal was resubmitted under revised terms last week, promoting investors to push up 3Com's share price 13 per cent on Friday in the hopes that the revised agreement will satisfy regulatory concerns this time around. 3Com has announced plans to postpone a planned shareholder meeting until 7 March.
The 3Com deal is not the first involving the information security market to get into trouble over national security concerns. Israel-based Check Point dropped its $225m planned purchase of intrusion prevention firm Sourcefire in March 2006 after objections from the FBI and Pentagon were heard by the Treasury's Committee on Foreign Investments.
FBI and Pentagon officials took exception to letting foreigners acquire sensitive technology used to protect them from hacker attack. Check Point later bought less prominent intrusion prevention firm NFR Security for about $20m in December 2006. ®